Will motion sensor makerInvenSense (
) soon get its first slice of business from Apple?
If the buzz on Wall Street is on the money, that may well be the
case. Some analysts speculate that InvenSense sensors are
incorporated inApple 's (
) new iPhone lineup announced Sept. 10. Investors will have a
better idea if they are when the new iPhone sales kick off in Apple
stores at 8am Friday (they start at 12:01 a.m. PT online).
InvenSense makes sensors that track motion on devices such as
smartphones, tablets, gaming consoles, digital still and video
cameras, and wearable fitness devices. This kind of capability has
come into much wider use lately.
InvenSense MotionTracking solutions combine different kinds of
motion sensors in a single-chip solution to power these intuitive
motion- and gesture-based interfaces. The micro-electromechanical
system-based sensors, such as a gyroscope, accelerometer and
compass, are combined with mixed-signal integrated circuits.
To date, InvenSense has not announced that Apple is a customer,
but there's plenty of buzz expecting that it is.
"There's a lot of talk we're gaining traction with Apple,"
InvenSense CEO Behrooz Abdi told IBD. "We don't comment on any
particular customer out of respect to their product planning."
The company has been on a roll even without the Apple business.
Earnings have climbed by at least 14% the past four quarters and
sales have risen by at least 28%.
But Apple would be a nice addition to its customer lineup, which
includes smartphone hot shot Samsung Electronics, its biggest
customer last year. Gaming playerNintendo Co. (
) was No. 2.
Latest Smartphone Features
Most recently, the "talk" regarding Apple has revolved around
InvenSense's sensors being incorporated in Apple's new iPhone
lineup, which includes the top-of-the-line iPhone 5S and midrange
iPhone 5C. The phones will be available in the U.S. and eight other
countries on Sept. 20.
Among the features on Apple's iPhone 5S is a fingerprint sensor,
called Touch ID. The phone also features a new chip called the M7
motion co-processor. The M7 enables a new generation of health and
fitness apps by continuously measuring motion data from the
accelerometer, gyroscope and compass.
The company declined to comment on whether its sensors are
included in the new iPhones. But Evercore Partners analyst Mark
McKechnie speculates they are.
"We won't know for sure until they ship the iPhones and we see
the products," he said. "But we think Apple's iPhone 5S highlighted
the importance of motion sensing," he said. "That's a big deal for
InvenSense. Apple has not been a customer to date, but our best
guess is that InvenSense will win some slots with their three-axis
gyro in some of the new iPhones."
In an email, Craig-Hallum Capital Group analyst Richard Shannon
said the presence of the M7 chip "suggests there has been a big
overhaul in how sensors are being used."
It also suggests Apple has "opened up" the design to
competition, he adds.
"I think it is more likely InvenSense would win such a
competition," he said.
On the flip side, Piper Jaffray analyst Gus Richard wrote in a
report he does not expect InvenSense to be in the new iPhone.
Rather, he expects it will be in the next iPad, which is expected
to be announced at a separate event in October.
Richard sees a lot of growth coming out of InvenSense's current
"Since the launch of the Galaxy S4, InvenSense has been winning
all of the new platforms at Samsung," he said.
Richard adds that, given Samsung's smartphone market share is
approximately 32% and Apple's is about 14%, he believes "traction
at Samsung is far more impactful to estimates than Apple."
InvenSense's third-quarter revenue guidance calls for 22% to 25%
growth quarter over quarter, he adds.
"We believe the majority of this growth will come from the ramps
of the Samsung S4 mini, Samsung Galaxy Note 3 phablet, Nintendo,
and tablets from Apple,Google (
) andAmazon (
)," wrote Richard.
Meanwhile, InvenSense has been faring handsomely on the
financial front. First-quarter earnings grew 40% to 14 cents a
share. Sales climbed 43% to $55.9 million.
Sales rose as the company once again shipped a record number of
units, Abdi said in a statement. He expects the company to ship a
record number of products in the current second quarter, "growing
unit volumes and revenue significantly."
A Better Picture
During the quarter, it saw strength in unit volumes of its
optical image stabilization products (OIS) as well as in emerging
markets such as China in smartphones, where both attach rates and
shares of its products increased, Abdi said on the first-quarter
Abdi told IBD that OIS is a "significant new market" that's
contributing to the company's growth. OIS goes into the smartphone
inside the camera module to compensate for hand movements.
InvenSense's chip enables image stabilization. As the hand moves,
it detects it, sends a signal to the phone and it's able to adjust
the lens to compensate for it, Abdi says. InvenSense's OIS product
in smartphones such as the HTC One phone.
Abdi, who has been CEO since October 2012, has mapped out a
"multilayer growth strategy of market share increases, new content
and new markets.
"Our growth strategy is to continue to gain share in established
markets like cellphones and gaming," he said. "We intend to bring
new content to cellphones with new features and new products. We're
also very focused adjacent markets such as wearable devices."
InvenSense is also moving into other markets such as industrial
Abdi says he's "excited about new markets such as health and
fitness with wearable devices."
MotionTracking devices can accurately detect a range of human
body motions to enable activity monitoring functionality in fitness
devices. Wearable sensors in health monitoring and sports and
fitness allow for precise tracking and monitoring of body motion
and more sophisticated applications providing users with new levels
of valuable information.
InvenSense competes with semiconductor makers.STMicroelectronics
NV (STM) is its main competition. Others includeAnalog Devices
(ADI) and Panasonic.
InvenSense differs from its rivals in a few ways.
"We're not cheaper," said Abdi. "We're a little more expensive.
But customers are willing to pay for our value because of the
strength in the size, performance and accuracy of our product."
Another difference: While many of its rivals make their products
in their own factories, InvenSense uses a fabless business model,
working with third parties to manufacture its products. The
critical test and calibration functions are performed in its wholly
owned subsidiary in Hsinchu, Taiwan.
Being fabless allows InvenSense to be more "flexible" in its
supply chain, says Abdi. And it can add capacity and respond to the
It's able to have a "virtually unlimited supply" because of its
partnerships with the large foundries, which have a lot of wafer
"Being fabless affords them cost efficiencies and a less
capital-intensive business model," Shannon said.
Analysts polled by Thomson Reuters see fiscal 2014 full-year
earnings rising 20% to 71 cents a share. They project a 30% rise in